Bank Sees $852 Million Operating Loss

January 27, 1988

First City Bancorp of Texas said Tuesday it will report an operating loss of about $852 million for the fourth quarter of 1987.

The firm, which would be headed by the former chairman of First Chicago Corp., A. Robert Abboud, under a reorganization plan, attributed the loss to a revaluation reserve and other one-time expenses associated with the plan.

The company set a shareholders meeting for March 4 to vote on the plan, which was proposed by First City, Donaldson Lufkin & Jenrette Securities Corp. and the Federal Deposit Insurance Corp.

Under the proposed reorganization, First City will transfer $1.79 billion of nonperforming and substandard loans to Collecting Bank, a new national bank. The company said it will take a fourth-quarter loss of $502 million in establishing a revaluation reserve for the new entity.

The reorganization plan also calls for transferring the remaining assets and liabilities of First City to a new holding company, which will raise $500 million in new capital through a private placement, conduct a tender offer for First City`s public debt and continue the company`s operations under the First City name.

First City will transfer 100 shares of its existing common stock for one common share in the new holding company, 100 shares of Collecting Bank common stock and the right to purchase additional securities of the new holding company.

The new holding company also will offer to purchase First City preferred stock for cash at 17.3 percent of its liquidation value.

Preferred stockholders also will receive shares of Collecting Bank common stock. The new holding company will be separate from Collecting Bank.

In addition to the $502 million loan-revaluation reserve, the fourth-quarter loss at First City included a $176 million writeoff for loan losses, a $60 million loss for lost goodwill, a $51 million loss for depreciated real estate and $23 million for costs associated with the proposed reorganization.